Most Stocks Rise as Banks Gain; Treasuries Trim Advance

By Rita Nazareth and Susanne Walker -
Apr 16, 2012

Most U.S. stocks rose, following
the biggest weekly decline of the year, as Citigroup Inc. led
banks higher and stronger-than-forecast growth in retail sales
bolstered optimism in the economy. Treasuries trimmed earlier
gains and the Dollar Index retreated.

The Standard & Poor’s 500 Index (SPX) fell less than 0.1 percent
to 1,369.57 at 4 p.m. in New York while the Dow Jones Industrial
Average increased 71.82 points to 12,921.41. About six stocks
rose for every five that fell on U.S. exchanges. Ten-year
Treasury yields lost less than one basis point to 1.98 percent
and the dollar weakened against 10 of 16 major peers as the euro
rose 0.5 percent to $1.3142, reversing a 0.6 percent earlier
loss. Spanish 10-year bond yields increased nine basis points to
6.07 percent and jumped as much as 18 basis points.

Citigroup led U.S. banks higher after reporting fixed-
income trading revenue more than doubled from the fourth
quarter. Commerce Department data showed retail sales increased
0.8 percent in March, almost triple the median forecast of
economists in a Bloomberg survey. Equities recovered after most
stocks fell earlier as gains in Spanish and Italian bond yields
fueled concern Europe’s debt crisis was worsening.

“The U.S. is a better economic story,” said Madelynn Matlock, who helps oversee about $14.6 billion at Huntington
Asset Advisors in Cincinnati. “Retail sales showed that
consumers are not being overwhelmed by gas prices. On top of
that, corporate earnings should be at least respectable.”

Stocks Rebound

The S&P 500 rebounded after tumbling 2 percent last week,
its biggest drop of the year. Travelers Cos., Procter & Gamble
Co. and Home Depot Inc. rose more than 1.4 percent to lead gains
in the Dow. Citigroup Inc. climbed 1.8 percent as 23 of 24
stocks in the KBW Bank Index advanced.

Apple Inc. (AAPL) tumbled 4.2 percent, the most since October, and
Google Inc. fell 3 percent as technology shares had the biggest
decline among the 10 main S&P 500 groups.

Apple slid for a fifth day, the longest losing streak in
six months, amid speculation that demand for the iPad may wane
and that mobile-phone carriers will cut subsidies for the
iPhone. The stock has lost almost 9 percent since closing at a
record high of $636.23 on April 9.

Nasdaq OMX Group Inc. said late on April 13 that Texas
Instruments Inc. will replace First Solar Inc. in the Nasdaq-100
Index, the basis for this year’s fifth-most-traded U.S.
exchange-traded fund. Because Texas Instruments has a larger
market capitalization than First Solar, other stocks in the
index are likely to see their proportion shrink, according to
Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus &
Co.

Apple’s Influence

Apple influences the price of the Nasdaq-100 more than any
other stock, accounting for almost 19 percent of its value,
according to data compiled by Bloomberg. That’s double Microsoft
Corp.’s weighting. Lutz, based in Baltimore, said in an e-mail
that Apple shares may be down in part because of Nasdaq OMX’s
decision.

“Apple is ubiquitous, it’s well-owned, it’s had a huge run
up and people are taking some profits,” Matt McCormick, who
helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati,
said in a telephone interview. “If you’re concerned about the
market being choppy, you look at positions that had the biggest
gains and Apple would clearly be one of those candidates.”

U.S. stocks started the session higher, with the S&P 500
climbing as much as 0.7 percent, as Commerce Department data
showed U.S. retail sales rose 0.8 percent in March, topping the
median economist estimate for 0.3 percent growth.

Stocks Versus Bonds

Treasury yields below zero on an inflation-adjusted basis
for only the second time since Dwight D. Eisenhower’s presidency
have split Wall Street’s biggest firms, underscoring the
relative-value dilemma equity investors face following the
biggest first-quarter rally in 14 years.

For Goldman Sachs Group Inc.’s Peter Oppenheimer, U.S.
stocks offer a once-in-a-generation buying opportunity after
yields on 10-year Treasuries (GBTPGR10) fell to about minus 0.3 percent
when the rate of inflation is deducted. Morgan Stanley’s Adam
Parker advises caution, saying Federal Reserve stimulus that has
led the fixed-income rally can’t last forever.

U.S. 30-year bonds erased gains, with the yield little
changed at 3.13 percent after falling as much as four basis
points. Rates on two-year notes were little changed at 0.27
percent.

‘One Eye’ on Europe

“At least one eye is back on Europe,” said Thomas Roth,
senior Treasury trader in New York at Mitsubishi UFJ Securities
USA Inc. “It’s hard to be short Treasuries. You have to be a
bit cautious,” he said. “The question is what matters more,
what happens here or what happens in Europe.”

The dollar weakened more than 0.6 percent versus the
Japanese yen and Norwegian krone. The yuan slid after China
doubled the currency’s trading band against the dollar for the
first time since 2007.

Spain’s bonds declined as Jaime Garcia-Legaz, a deputy in
the Economy Ministry, called on the European Central Bank to buy
the nation’s debt to help stem financial-market turmoil. Spain
is scheduled to sell bonds tomorrow and on April 19 as the cost
of insuring its debt against default touched a record.

European Bonds

The yield on the German 10-year bund retreated two basis
points to 1.72 percent. The difference in yield between Spanish
10-year bonds and German securities, Europe’s benchmark, was 11
basis points higher at 435 basis points, or 4.35 percentage
points, after earlier widening by as much as 20 by points. The
Italian-German yield gap widened by nine basis points to 3.88
percent. French 10-year bonds declined, with the yield advancing
seven basis points to 3.02 percent.

Credit-default swaps on Spain jumped nine basis points to
511 after reaching 521 earlier, according to CMA. Contracts on
Italy rose about seven basis points to 441, the highest level in
almost three months.

Among commodities tracked by the S&P GSCI Index, nickel,
gasoline and cotton fell at least 2.5 percent to lead declines
among 16 of 24 materials.

Crude oil gained 10 cents to $102.93 a barrel in New York.
The reversal date of the Seaway crude pipeline was moved up,
causing the spread between New York-traded futures and Brent in
London to narrow to the least since February. Enbridge Inc. and
Enterprise Products Partners LP said they would start moving oil
from Cushing, Oklahoma, to the U.S. Gulf Coast via the pipeline
in May.

Speculators cut bullish wagers on commodities by the most
in 2012 on mounting concern that slowing growth in China will
curb gains in demand. Money managers lowered net-long positions
across 18 U.S. futures and options by 9.3 percent to 1.01
million contracts in the week ended April 10, the biggest
reduction since Dec. 20, data from the Commodity Futures Trading
Commission show. Copper holdings tumbled 84 percent, the most
since November.